To lower costs, companies are focusing on reducing return rates
Product returns are always an unhappy expense to a business. But if that involves paying for a customer to ship the product back to you, that expense is amplified. Amid rising expenses, including climbing shipping rates, many businesses are looking to combat budget constraints by tackling return rates. In this article, we take a look at this predicament, and what can be done to avoid your shipped goods being sent back to you.
How much of an issue are return shipments?
In 2024, the average return rate for ecommerce was 16.9% of sales – though some retailers are looking at numbers closer to 30%, depending on the product. Clothing and shoes, as well as other items requiring specific sizing, are often returned at higher rates. This number is also climbing, more than doubling from an average of 8.1% in 2019.
That’s a pretty staggering number, when you picture between 17 and 30 of every 100 e-commerce purchases being returned. Then, imagine the shipping costs and other expenses associated with that rate. In 2024, consumer returned products cost American businesses $890 billion. On average, the cost to process a return can be anywhere from 20%–65% of the item’s original value.
Trends show brands are changing their return policies.
The Reverse Logistics Association’s (RLA) returns index for 2024 found that major brands are strategizing against cost increases by addressing return policies. Among a selection of American top hundred retailers:
- 30% charged restocking fees
- 75% limited what could and could not be returned
- Many offered better return options through subscriptions and customer loyalty programs
Likewise, a different study by ReturnPro found that “that nearly 60% of retailers have keep-it policies for items that aren’t financially viable to ship back.”
This isn’t only because of rising costs. The rise of fraudulent returns is also on the rise, causing a “significant issue” for as much as 93% of retailers. Protecting yourself against this expense is an important part of your logistics and fulfillment strategy.
How do you reduce your business’ return rates?
Charging for certain returns or having no-return policies on some items are some of the strategies businesses are using to reduce return rates. Some practices you may want to implement, if possible, include:
- Directing customers to post returns to your warehouse, rather than a brick-and-mortar store
- Directing customers to drop off returns physically, rather than shipping them back
- Including clear limits and cut offs in your return policy – for example, clearly stating how many days the customer has, what condition the item must be in, and what can be exchanged versus refunded
- Including clear and easy-to-find product information to reduce the amount of unnecessary returns
- Investing in smarter packaging materials to ensure the amount of returns due to damage in transit is minimal
- Investing in third-party software that can help identify and blacklist serial return fraud offenders
Of course, returns will never entirely disappear. Mistakes happen, both on the seller and buyer’s ends. However, there are steps that can be taken to reduce your rates, beating the 17 in 100 statistic.
